Standing Committee A

[Sir John Butterfill in the Chair]

Finance Bill

(except clauses 4, 5, 20, 28, 57 to 77, 86, 111 and 282 to 289, and schedules 1, 2, 11, 12, 21 and 37 to 39)

Clause 303 - Exclusion of extended limitation period in England, Wales and Northern Ireland

Howard Flight: I beg to move amendment No. 548, in
clause 303, page 247, line 14, leave out '8th September 2003' and insert
'the date six months after this Act shall have received Royal Assent.'.

John Butterfill: With this it will be convenient to discuss the following amendments:
 No. 549, in 
clause 303, page 247, line 15, leave out from beginning to end of line 7 on page 248. 
No. 550, in 
clause 304, page 248, line 22, leave out '8th September 2003' and insert 
 'the date six months after this Act shall have received Royal Assent.'. 
No. 551, in 
clause 304, page 248, leave out lines 23 to 31.

Howard Flight: I welcome you, Sir John, to chairing our deliberations on what will be the last day of the Committee.
 Tax legislation has allowed claims for overpaid tax to be made for years that end within the previous six years. Similarly, the Revenue can normally go back six years to assess outstanding tax. A High Court decision in the Deutsche Morgan Grenfell case potentially changes the position. Deutsche Morgan Grenfell successfully argued in the High Court that the English common law remedy of restitution of payment made under a mistake of law applied to payments of tax. The result is that, where the view of the law changes as a result of a court decision, within six years of that decision, proceedings could be commenced in the courts for repayment of tax made under a mistake of law for all back years—that is, not time barred. 
 The clause covers England, Wales and Northern Ireland and the related clause 304 introduces a similar rule for Scotland. As I understand it, the Inland Revenue is appealing the Deutsche Morgan Grenfell decision, and the clauses set out provisions that apply to court actions brought on or after 8 November 2003. For those actions, the intention is to legislate that, for 
 Inland Revenue taxation matters, the usual six-year limits apply to common law actions for relief from the consequences of a mistake of tax law. 
 It has been argued by many that these provisions are contrary to European Union law, as there is no allowance for a transitional period and, in particular, to the judgment of the European Court of Justice in Marks and Spencer v. Customs and Excise, in which the relevant facts were identical. In citing earlier judgments, the European Court of Justice held that the national legislation retroactively curtailing limitation periods was incompatible with the principle of effectiveness and the protection of legitimate expectation. The Institute of Chartered Accountants in England and Wales said: 
''there will inevitably be litigation, with the costs of both sides likely to be met out of the public purse.'' 
Amendment No. 548 therefore proposes the introduction of some transitional arrangements for the provision. The easiest of these appears to be simply to delay it for six months after Royal Assent. That would give taxpayers time to work out whether they already have a cause of action that will become time barred under the new rules and to start proceedings within the transitional period, so that the right is not taken away from them without them having a chance to exercise it. It is only common justice that, if proceedings are taking place now, which I understand is the case, they should not suddenly be cut off in the middle without a transitional period that allows them to finish. 
 As I understand it, there is no disagreement in essence about what clauses 303 and 304 do, which is to put the position back to what it has always been thought to be. However, there is a powerful case for transitional arrangements, whether via the routes that we propose, or an alternative route to be suggested by the Government.

Dawn Primarolo: I will urge the Committee to reject the amendments, should they be put to the vote, as they would undermine the effectiveness of the measure, which has been introduced to protect direct tax revenues. There is nothing unusual about a Government moving in such cases. There are examples of that under this Government and the previous Government.
 Clauses 303 and 304 preserve fair and effective time limits for claiming repayment of overpaid tax. For many, many years, there has been symmetry in the direct tax system. The Inland Revenue has the right to assess outstanding tax for six years and those who have overpaid tax have the right to make claims for repayment for the same period. 
 As the hon. Member for Arundel and South Downs (Mr. Flight) pointed out, the High Court judgment in the recent case of Deutsche Morgan Grenfell v. the Commissioners of the Inland Revenue has the potential to upset that balance. The High Court held that the English common law remedy of restitution for payment made under a mistake of law applied to payments of tax. The judgment has no binding effect in Scotland. 
 The judgment means that, where the view of the law changes as a result of a court decision, proceedings can, within six years of that decision, be commenced in the courts in England, Wales and Northern Ireland for repayment of tax paid under a mistake of law and can be for all back years without limitation. In principle, that might mean that a taxpayer in England, Wales and Northern Ireland could take any court judgment that has overturned the previously accepted view of the law and, within six years of that decision, claim repayment for any past year. 
 The DMG case is about the payment of advanced corporation tax, which was introduced in 1973, so all years back to that year are potentially affected. However, the scope of the DMG decision is arguably much wider than that. If upheld, the decision would apply to most direct taxes. Although the Inland Revenue is appealing the judgment, the Government think that it would not be sensible to await the final outcome in the courts and, on 8 September 2003, announced the measure with operative effect from the date of announcement. 
 Clause 303 will ensure that, for Inland Revenue taxation matters, the same six-year time limit applies to common law actions for relief from the consequences of a mistake of law as applies to other actions to recover direct tax. That will protect the Exchequer from uncertainty and from a potentially large loss of tax revenues. 
 Clause 304 reflects the differences in Scottish law and brings about a result in Scotland that is in line with that to be brought about in England, Wales and Northern Ireland. Together, the clauses will ensure symmetry and preserve generous time limits in the United Kingdom direct tax system. 
 The amendments would unnecessarily undermine the effectiveness of the clauses. A transitional period prior to the commencement date of legislation would invite claims from any taxpayer who could have benefited from the DMG decision but did not commence proceedings before the Government announced their intention to legislate on 8 September 2003. In Scotland, such a period would encourage taxpayers to make such claims, even though the DMG decision does not directly apply there. That could leave the Exchequer vulnerable to a significant loss of tax revenue. In any event, our advice is that a transitional period is not necessary. 
 Amendment Nos. 548 and 550 would give six months from the date of Royal Assent for such claims to be made. Allowing any transitional period for the introduction of the measure by deferring the commencement date of the legislation, when we are advised that that is unnecessary, would leave the Exchequer vulnerable to a significant loss of tax revenues. 
 The loss of tax revenues cannot be quantified. It is impossible to know how many claims and in what amounts could be made. We are confident that large sums would be involved. We are well aware of the arguments that a transitional period is necessary for 
 legislation to comply with European law. However, the firm legal advice received by the Inland Revenue is that a transitional period is not necessary in this instance. On that basis, the Government's view is clear that a transitional period should not be built into the legislation. 
 Amendments Nos. 549 and 541 would remove the provisions in the clauses dealing with court actions started between 8 September 2003 and Royal Assent. Amendment No. 549 also removes the provisions in clause 303 preventing amendments to court actions started before the clause becomes effective from seeking to introduce earlier periods of claim. Amendments Nos. 549 and 551 have presumably been tabled on the basis that the provision would not be necessary if a transitional period were allowed before the commencement date of the legislation. However, even if it were acceptable to defer the commencement date of the main change, it would still be necessary to build in provisions relating to amendments to court actions started before the commencement date for the main change. This would be further to protect the Exchequer in the event that the courts were to allow such amendments. 
 That is all hypothetical. For the reasons that I have explained, the amendments are unacceptable. I am sure that hon. Members would not wish the Exchequer to be exposed to the uncertainty and potential loss of tax revenues that would result from the amendments. I urge the Committee to reject all of them.

Howard Flight: The ECJ judgment in the Marks and Spencer case said:
 ''Whilst national legislation reducing the period within which repayment of sums collected in breach of Community law may be sought is not incompatible with the principle of effectiveness, it is subject to the condition not only that the new limitation period is reasonable but also that the new legislation includes transitional arrangements allowing an adequate period after the enactment of the legislation for lodging the claims for repayment which persons were entitled to submit under the original legislation. Such transitional arrangements are necessary where the immediate application to those claims of a limitation period shorter than that which was previously in force would have the effect of retroactively depriving some individuals of their right to repayment, or of allowing them too short a period for asserting that right.'' 
I am not arguing in terms of moral righteousness here. Indeed, I am not a huge supporter of the ECJ. It is about time that the Government did something to stop it interfering with our tax system the whole time. It clearly has a mandate to create common European taxation. However, contrary to the Minister's comments—I have had input from top, respected tax counsel—those on the other side of the argument are quite convinced that the judgment applies. I understand that there is likely to be a judicial review on that point, which will resolve it one way or t'other. 
 The purely practical issue is that of legal advice. The Government have their legal advice one way, so they will not do anything with this Finance Bill. If there is a judicial review and the Government lose, they will have the cost and the problems related to that. However, that is the way they have chosen to resolve the issue of whether the Marks and Spencer case applies. I have raised the issue. The arguments on both 
 sides are perfectly clear. These matters will be resolved by judicial review in due course, so there is little point in putting the amendment to a vote.

Dawn Primarolo: I want to deal with the point about Marks and Spencer and Her Majesty's Customs and Excise. Just as an aside, I smiled when I saw the hon. Gentleman's amendments in defence of the ECJ, but I will not take that any further. The change introduced by Her Majesty's Customs and Excise involved a reduction in the existing time limits for assessing and reclaiming indirect tax from six years to three years, hence the issue of transition. Clause 303 simply restores the position that was thought to exist prior to the DMG decision. The clause does not reduce a known limitation period, as was the case with the change introduced by Her Majesty's Customs and Excise. Instead, it preserves what was thought by most to be the limitation period, which in any event is a generous six years.

Howard Flight: I understand the argument. I am not a lawyer and nor is the Paymaster General, but she must be aware that the issue of whether the ECJ ruling is relevant can be argued both ways. I cannot quote counsel's advice because it is sub judice, but there is a clear legal line on why the ruling applies. Put simply, unless the DMG judgment is overturned, it is the law. For better or worse, it changed the law. If the Government change the law back again—albeit for understandable reasons—to what they thought it was, they have changed it from an unlimited period to a six-year period. I totally understand the logic of doing that, but that would be the legal position. It is pretty simple to argue that the case is analogous to the Marks and Spencer case, which also involved shortening a period.
 However, there is little point in using the Committee's time to argue points of law—we are not lawyers. The matter has been put on record and will clearly be resolved by forthcoming judicial review. I beg to ask leave to withdraw the amendment. 
 Amendment, by leave, withdrawn. 
 Clause 303 ordered to stand part of the Bill. 
 Clause 304 ordered to stand part of the Bill.

Clause 305 - Mutual assistance: customs union with the Principality of Andorra

Question proposed, That the clause stand part of the Bill.

Andrew Tyrie: I have one brief question, which the Economic Secretary can drop me a line about. Why is the clause restricted to imports and exports of goods, rather than including services as well? In the interests of brevity, so that we can try to wind up this morning, my only other point is that, again, we can see Sir Humphrey's influence in the background notes, which state:
 ''Joint Committee Decision No 1/2003 (adopted on 3 September . . . ) provides for a number of administrative mechanisms designed to improve procedures.'' 
 I am bewildered to know exactly what that means, but I will not waste the Committee's time exploring it. I would just like an answer on the services point.

John Healey: This a relatively straightforward clause, which provides mutual assistance between Andorra and the UK in the recovery of customs debts. It will enable the UK and Andorra to assist each other in the recovery of customs debts owed to one by businesses that are established, or have assets in the other. The clause deals with current UK legislation and provides for mutual assistance in debt recovery between the UK and other member states and Andorra.
 As the hon. Gentleman says, the clause applies only to customs debts arising from unpaid customs duties payable on imports or exports. The mutual assistance provisions do not extend to indirect taxes such as VAT, excise duties, charges such as agricultural duties or direct taxes such as income tax or corporation tax. 
 The safeguards are identical to those that apply to intra-EU mutual assistance. They will be in place to allow the taxpayer to challenge disputed liabilities. I will, as the hon. Gentleman requests, write to him about goods and services, and I commend the clause. 
 Question put and agreed to. 
 Clause 305 ordered to stand part of the Bill.

Clause 306 - Ending of shipbuilders' relief

Question proposed, That the clause stand part of the Bill.

Andrew Tyrie: This is a small clause with a long history. It removes tax relief on energy input used to construct ships, and it is part of a raft of major measures to subsidise shipbuilding in this country that have been in place for decades. To its detriment, the industrialised world engaged for a generation of shipbuilding in an auction of subsidies, and some auctioning continues to this day.
 We support the clause. We left such clauses on the statute book as well of course, but I hope that the Committee does not find it too party political of me to point out that it took an EU directive requiring the removal of those state aids to force the ending of relief. Since the Government came to power, the reliefs under the clause have totalled £70 million. We are talking about not threepence ha'penny, but quite a sizeable sum of money. I do not mind if the Economic Secretary has to write to me to answer these three important questions. Are there any other forms of state aid to shipbuilding left? Who were the beneficiaries? Are the Government committed not to find other ways of getting money to the shipbuilding industry? 
 The other general issue concerns whether we will be—as usual—reasonably obedient European citizens, getting rid of the relief, while other shipbuilders in 
 Europe may not be so quick to get rid of it. Many have argued that the auction of reliefs must be reduced, leaving a level playing field at each stage of reduction. I am not convinced by that argument in terms of economics or in practice. However, it is an argument. Therefore, what is the situation for the removal of similar reliefs in the main subsidising shipbuilding countries of the EU, Germany, Spain and one or two of the new entrants, such as Poland? 
 I will understand if the Economic Secretary does not have the answers to all those points, but why have the Government decided to delay implementation for a year? Is it because they already had commitments to ships under construction, which would have meant changing the terms for beneficiaries of the relief, or is there another purpose to the delay? Beyond that, I would be happy if the Economic Secretary wrote to me on any points that he is not able to answer today. As I said, I support the measure.

John Healey: I believe that I will not need to write to the hon. Gentleman, as I can answer his questions directly. The European state aid rules, plus the regulation that was passed in 1998 and came into effect at the end of 2000, apply across the EU. The UK is not singled out by the regulation for removal of old-style subsidies. The spirit and purpose of the regulation is to remove such reliefs across the European Union.
 The hon. Gentleman asked about remaining state aid. A form of special support for shipbuilding in Europe was introduced in June 2002 as a temporary defence mechanism, principally in response to particular competitive pressures from the Korean shipbuilding industry. It applies in a very restricted way to container ships and chemical carriers. In fact, it does not apply to any of the ships built in UK yards. It was intended to last until March 2004 and has been extended by one year. That is the only remaining type of formal state aid. I shall discuss the beneficiaries of the traditional shipbuilders' reliefs in a moment. 
 To support the shipbuilding industry, the UK Government have shifted the focus of support from old-style operating subsidies, as the hon. Gentleman rightly noted—I welcome his support for the measure—to supporting and directing investment to help the shipbuilding industry to build up its skills base and to increase investment in technology, research and development. Such productive investments will help to secure the industry's long-term future. We have moved away from the direct operating subsidies represented by shipbuilders' relief. 
 The clause repeals the national legislation on shipbuilders' relief. I announced the abolition of the old-style operating subsidy in my written statement to Parliament on 12 January. Abolition reflects the Government's policy to replace operating subsidies with more effective support for the shipbuilding industry: promoting international competition; promoting and putting in place support for enterprise, research and development; science and innovation; and tackling skills needs. 
 Contrary to the hon. Gentleman's impression that there is a one-year delay, the statement of 12 January confirmed the full and immediate abolition of shipbuilders' relief. The clause repeals with retrospective effect the national legislation on shipbuilders' relief. 
 As the hon. Gentleman said, this is a short clause with a long history. Shipbuilders' relief was introduced in 1966 to provide relief to shipbuilders from hydrocarbon oil duty incurred on the costs of constructing, fitting out and equipping certain vessels. The relief was payable by Customs and Excise at a rate of 2 per cent. of the value of an eligible vessel. The relief was, in effect, an old-style direct operating subsidy that has no place in a modern and competitive business environment. 
 In view of our policy for modernising the support that we give to industry, in 1998, we gave strong support to the European Commission's preparation of the regulation that established new rules on aid to shipbuilding. The regulation explicitly refers to commercial vessels and fishing vessels for export from the Community. Since Community regulations have direct effect in member states, the classes of vessel specified in the regulation automatically lost their right to shipbuilders' relief from 31 December 2000, the date the regulation came into force. 
 Shipbuilders' relief was also payable in respect of other fishing vessels and warships. The purpose of the regulation was to bring to an end state operating aid in the Community. To comply with the spirit of the regulation and with more general state aid law, I also announced on 12 January the abolition, with immediate effect, of shipbuilders relief for those categories of vessels. However, I confirm that Customs will honour claims for contracts signed on or before the date of my announcement in Parliament in respect of those categories of vessels. 
 The Government are therefore committed to continue support for our manufacturing industry, and shipbuilding in particular, but it will be done differently in order to ensure that the industry has the skills that it needs and the right level of productive investment for the future. I commend the clause to the Committee.

Andrew Tyrie: I thank the Minister for that reply, which was erudite, thorough and well informed. I did not make myself clear; I thought that implementation had been delayed EU-wide for a year. If I am mistaken—
John Healey indicated assent.

Andrew Tyrie: The Minister is nodding. I think I read about that somewhere or other while briefing myself for today's debate. I shall take another look and drop him a line.
 The Minister referred to the large number of other measures intended to help the shipbuilding industry, through more modern assistance, improvements in the skills base, R and D and other methods. Has he put a cost to those measures, and will he share it with the Committee, either now or later?

John Healey: Why wait? In June 2001, we launched a four-year project with the shipbuilding industry. The total funding committed to the project was £6 million, £3 million of which has been paid. It is called the Link shipbuilding research project and it is paid through the Shipbuilders and Shiprepairers Association. It is designed to help the work force and the yards by combining academic studies with masterclasses tailored to the needs of the yards involved.
 In my statement of 12 January, I made it clear that we are setting up sector skills councils, a new way of bringing the commitment of industrial sectors and the trade unions together to build a skills base for those industries. The new sector skills council that covers shipbuilding, but that goes more widely, is preparing a sector skills agreement. If it is approved, it will draw £500,000 of direct support from the Government. In my statement, I also committed an additional £500,000 to help build the skills base in the shipbuilding industry. Those are the sums that we have committed over recent years. 
 As I explained in my more general comments, that is the focus of the support that we now regard as being appropriate for the industry of the future. 
 Question put and agreed to. 
 Clause 306 ordered to stand part of the Bill.

Clause 307 - Ending of shipbuilders' relief

Question proposed, That the clause stand part of the Bill.

Andrew Tyrie: This is an interesting little clause. It will give the Government, and particularly the Treasury through its executive agencies the Debt Management Office and National Savings and Investments, or whatever it calls itself now, the power to spend money in preparation for the possible introduction of the single currency. I shall resist all temptations to broaden the debate.
 I have a few basic, simple questions. We have been unable to obtain answers to similar questions about departmental spending in preparation for the euro in other areas. In fact, the official Opposition have been hard at it trying to find out what is involved, and I have a raft of parliamentary questions illustrating the extent to which the Government have stonewalled. I hope that we can get some more accurate answers, at least in respect of the two Departments to which the clause directly refers. How much will they spend, is there a cap, has the Treasury worked out what would be reasonable, and how would that money be allocated? Whenever such parliamentary questions have been asked in the past, they have not been answered, but the answer given refers the inquirer to the third outline national changeover plan, which of course does not give the answer; it gives an answer for Departments that do not concern us here today. Only three Departments have published a cost, which is £30 million. We want to know how much will be spent. 
 We want a clear justification from the Minister on why we should agree to such open-ended powers. After all, the provision will enable the Treasury to spend any amount of money on the euro indefinitely. That is an unusual way to go about running any spending programme, even in the Treasury. 
 I do not know whether I am the only person who reads explanatory notes, but I was rather taken by paragraph 4, which says: 
''the Chancellor announced that there would be 'paving' legislation to allow departments to make further, targeted investments as necessary for preparations for the possible introduction of the single currency.'' 
I wondered what the word ''investments'' was supposed to mean in this context, as if we are guaranteed a return if we spend money to prepare for the single currency. An investment that does not secure a return seems to me to be an abuse of the word ''investment'', and the complete collapse of language arrives shortly afterwards. Indeed, that has happened in a wide area of so-called public sector investment: when one scratches it, one finds that it is spending on salaries or other tasks and not investment in any normal understanding of the word. 
 I should be grateful if the Minister could tell us how much will be spent, what it will be spent on and how much, if any of it, will be capital spending, which could, at least in theory, call itself an investment. Does the Treasury intend, even though it is not to be put in statute, that the amount spent should be time-limited? Although this goes beyond the scope of the clause, will she, while she is at it, encourage other Departments to publish their figures for the amount that they are spending? Quite reasonably, the public want to know, and they are being denied an opportunity to find out.

David Laws: I support the hon. Gentleman's comments, without wanting to take the debate too wide. We are entitled to know, if the Government are making provision to spend money on euro preparations, whether the money will go for any purpose or will go down the drain. We know that there are differences in the Government over the commitment to join the euro. We know that the Prime Minister is enthusiastic; we are not so sure whether the Chancellor is. We are entitled to establish whether the clause and some of the other measures that the Government are putting in place to spend money on euro preparations are simply a sop to the Prime Minister to keep him happy and to maintain his conviction that at some stage we might join the euro.
 The Chancellor is increasingly giving the impression that there is an alternative model of macro-economic management for Britain, which is the one that he has established since 1997, and that, frankly, we might never join the euro. If that is the case, it is utterly pointless to spend large amounts of taxpayers' money simply to keep the Prime Minister happy. I hope that the Minister will let us know today how strong the Treasury's commitment to the euro is and whether she believes that, within, say, the next 10 or 20 years—quite a generous time horizon—we will have joined the euro or whether this is all about stringing along the Prime Minister.

John Butterfill: Before I call the Minister, I should say that I think there is a danger of our going rather wide. This is an enabling clause: it does not commit the Government to expenditure. We will be able to debate elsewhere in the House proposals for such expenditure, as and when they arise. The clause is merely enabling and we should treat it as such.

Ruth Kelly: I value your guidance, Sir John. I shall not get drawn into a long debate about euro preparations or our policy towards the euro. It is better if I deal with the clause, which, as you rightly pointed out, is an enabling clause. It authorises the United Kingdom Debt Management Office and National Savings and Investments to incur expenditure in preparation for the possible introduction of a single currency. As hon. Gentlemen well know, that assumes that the UK passes the five economic tests, that Parliament approves a decision and that the issue is put to the people in a referendum.
 In his statement to Parliament on 9 June 2003, the Chancellor announced that there would be paving legislation to allow Departments to make further targeted investments as necessary preparations for the possible introduction of a single currency under those conditions. The clause achieves that targeted investment for the Government borrowing functions of the Debt Management Office and National Savings and Investments. As the hon. Member for Chichester (Mr. Tyrie) pointed out, the public sector had invested £36.8 million in preparing for a possible UK changeover, to the end of December 2002, the last time for which figures are available.

Andrew Tyrie: When that was published, a Minister pointed out that that figure referred to only three Departments. I am not sure where that was said.

Ruth Kelly: If the hon. Gentleman had more patience, he would have heard that I was about to give him more detail on how that money had been spent. The majority was spent in three critical path Departments, those that are likely to be most affected by the possible introduction of the euro. Those are the Inland Revenue, where £18.7 million has been spent, HM Customs and Excise, where £7.1 million has been spent, and the Department for Work and Pensions, which has spent £8 million.
 The size of the task faced by those Departments meant that, if we were to be in a position to prepare and decide, they had to make that investment early. Otherwise the cost of a possible changeover would have been absolutely huge. The amount of money spent early reduces the total cost. 
 The clause allows the DMO and NSI to reduce the risks associated with a possible changeover by making small, targeted investments on euro preparations. It is up to the individual Departments, together with the DMO and NSI, to present a business plan for approval that says how the money would be spent, but we have clear evidence that, in the euro area, early planning reduces costs and the associated risks of changeover. 
 We are not talking about significant sums but about much smaller sums than those involved in the three critical path Departments. It is impossible to say with accuracy what the figure will be. Sometimes it is a question of preparing systems in a slightly different way than would otherwise have been the case and of building in euro compatibility—for example, by investing in new IT systems—where that represents value for money. 
 Given the key role that both the DMO and NSI play in our Government debt management and some of the issues that need to be considered, which were set out by the Bank of England in its ''Practical Issues'' City changeover plan, it is important that we prepare early to reduce future risk.

Andrew Tyrie: Will any of that money be used to provide information to the customers of NSI about euro changeover? If so, will the Electoral Commission be consulted?

Ruth Kelly: The money is for the very small, targeted expenditure that is needed to reduce the risk of any future changeover. The Departments have to decide how best to allocate that money and present a case for it. If the hon. Gentleman has the idea that vast sums of Government money would be used by the DMO and National Savings and Investments to carry out a full-scale nationwide information campaign, that is just not the object of the exercise.
 National Savings has already presented a euro changeover plan and it is possible that it could achieve the timetable already set out in the national changeover plan, but we have concluded that the risks to it in trying to meet the changeover are unacceptably high. A little bit of targeted money now will reduce that risk substantially. It makes economic sense, leaves our options open and reduces the risks in a sensible manner, and I commend the clause to the Committee.

Howard Flight: My understanding is that the banking industry has refused to spend any more money on such preparations on the grounds of probability. Clearly, it has a certain interpretation of the Government's stance. In practical terms, whatever happens will be bound by whatever the banking system does, so there is not much sense in the Government spending money if the banking system is not spending money.
 I hope that these enabling clauses will be interpreted with the appropriate caution and restraint. There really is no point in spending that money; it is not a prudent investment and it will need to be spent as and when the banking system moves forward.

Andrew Tyrie: The Financial Secretary helpfully said that the sum would be much less than the £30 million-odd being spent primarily by three Departments, but we have not been told how much other Departments have spent. We have still not been supplied with the information that we asked of the Government. I should be grateful if she could provide a little more detail about how much she thinks will be spent—even
 if she cannot do it now—or at least say that she will come back to us if spending goes beyond a certain threshold.
 Is spending £5 million or £10 million? It is highly speculative expenditure of public money. As my hon. Friend the Member for Arundel and South Downs pointed out, based on the noises made by the Government most of the private sector has formed its own perfectly reasonable views and is not wasting money. The Government, however, are going ahead and spending, or at least planning to spend, the money. The public should know how much will be spent and, in more specific terms than we have been given, how. 
 I am often struck by how much more detail and transparency a budget prepared for a spending Department requires and how much scrutiny it can come under as a consequence of the work of the Comptroller and Auditor General, compared with how easily and with how little scrutiny the Treasury, often through tax relief and measures such as these proposals, can find ways of spending money. That is exactly what is happening now. There used to be many complaints about the Bank of England doing the same, although Ed Balls was excellent at working up transparency proposals from the Bank of England. 
 Now we have the same problem with these proposals, which I largely supported. In this clause, we have the problem in a microcosm. Can we please have the minimum level of detail expected for the vast majority of public spending in this country? How much will be spent? What is the cap? Will the Government come back to us if spending goes beyond the cap and, broadly, how much will be spent within that limit and how?

Ruth Kelly: I have already told the Committee that it is quite difficult to predict how much will be spent, although we expect the amount to be fairly small in relation to other Departments. I talked about £8 million by the Department for Work and Pensions, which has a much bigger task to make the benefits system compatible with payments in euros. It has a much bigger task than the DMO and National Savings and Investments, but it is up to the Department to present a business case, think through what possible risks there are with a changeover and analyse where small, targeted amounts could be spent now. Currently, it has no flexibility whatever to do that because it is not authorised by Parliament. It is merely asking for a little bit of extra flexibility. Of course, as this progresses, if it is able to give detailed estimates I will try my best to answer the hon. Gentleman's question in more detail in writing.

Andrew Tyrie: If the Minister will agree now to publish the business case, we can move on to the next clause.

Ruth Kelly: We do not generally publish the business case, partly because National Savings and Investments operates in a commercial environment. It would not be right to share detailed information. This might form part of a wider business case. It may be possible to provide estimates of how much has been spent. I am
 not sure about that. I will need to ask the individual Departments whether it is possible to isolate some of the costs. No doubt we will have this debate in future.
 On the point that the hon. Gentleman and the hon. Member for Arundel and South Downs made about the banking sector, we are closely engaged with the sector in the working groups and in the preparation of the national changeover plans. We have regular meetings with representatives from banking, insurance, the wholesale and financial markets, retail and small businesses, utilities, accountancy firms and so forth about how to prepare for the introduction of the euro. Many private sector organisations have already made small, targeted investments. In some sense many of them are well prepared. It is only sensible that the Government should match that. I appeal to the hon. Gentleman's common sense and that of my hon. Friends to approve this sensible clause. 
 Question put and agreed to. 
 Clause 307 ordered to stand part of the Bill.

New Clause 2 - Shares in employee-controlled companies and unconnected companies

'(1) Each of the provisions of Part 7 of the Income Tax (Earnings and Pensions) Act 2003 (c.1) (employment income: securities) specified in subsection (2) (exception from charges for certain company shares) is amended in accordance with subsections (3) to (5). 
 (2) The provisions are— 
 (a) section 429 (restricted securities), 
 (b) section 443 (convertible securities), 
 (c) section 446R (securities acquired for less than market value), and 
 (d) section 449 (post-acquisition benefits from securities). 
 (3) In subsection (1) of each of those sections, after paragraph (b) (but before the word ''and'' where that word features at the end) insert— 
 ''(ba) subsection (1A) is satisfied,''. 
 (4) After subsection (1) of each of those sections insert— 
 ''(1A) This subsection is satisfied if the avoidance of tax or national insurance contributions was not the main purpose, or one of the main purposes, of the arrangements under which the right or opportunity to acquire the employment-related securities was made available.'' 
 (5) In subsection (4) of sections 429, 443 and 446R, and in subsection (3) of section 449, for the words after ''are not'' substitute ''employment-related securities.''; and accordingly omit section 429(5), 443(5), 446R(5) and 449(4). 
 (6) In Chapter 3A of that Part of that Act (securities with artificially depressed market value), after section 446I insert— 
 ''446IA Disapplication of exceptions from charges 
 (1) Section 429 (exception from charge under section 426 for certain company shares) does not prevent section 426 (restricted securities: chargeable events) applying in relation to an event if section 446E or 446I(1)(a) would have effect in relation to the event. 
 (2) Section 443 (exception from charge under section 438 for certain company shares) does not prevent section 438 (convertible securities: chargeable events) applying in relation to an event if section 446G, 446H or 446I(1)(b) would have effect in relation to the event.
 (3) Section 446R (exception from charge under Chapter 3C for certain company shares) does not prevent that Chapter (securities acquired for less than market value) applying in relation to employment-related securities if section 446B would have effect in relation to them. 
 (4) Section 449 (exception from charge under Chapter 4 for certain company shares) does not prevent that Chapter (benefits from securities) applying in relation to a benefit if section 446I(1)(e) would have effect in relation to the benefit.'' 
 (7) In Chapter 3B of that Part of that Act (securities with artificially enhanced market value), after section 446N insert— 
 ''446NA Disapplication of exceptions from charges 
 (1) None of the provisions specified in subsection (2) (exceptions from charges for certain company shares) apply in relation to employment-related securities if the market value of the employment-related securities at the time of the acquisition has been increased by at least 10% by non-commercial increases within the period of 7 years ending with the acquisition. 
 (2) The provisions are— 
 (a) section 429 (restricted securities), 
 (b) section 443 (convertible securities), 
 (c) section 446R (securities acquired for less than market value), and 
 (d) section 449 (post-acquisition benefits from securities). 
 (3) If section 446L (market value on valuation date increased by more than 10% by non-commercial increases during relevant period) applies in relation to employment-related securities, section 429 does not subsequently apply in relation to the employment-related securities.'' 
 (8) This section applies on and after 7th May 2004.'. 
 —[Ruth Kelly.] 
 Brought up, and read the First time. 
 Motion made and Question proposed, That the clause be now read a Second time.

John Butterfill: With this it will be convenient to consider the following:
 Amendment (a), 
in subsection (5) after 'securities', insert 
 'that have been acquired within the previous seven years'. 
Government new clause 3—Restricted securities with artificially depressed value. 
 Government new clause 19—Approved plans and schemes. 
 Government new clause 20—Shares acquired on public offer. 
 Government new clause 21—Associated persons etc. 
 Government amendment No. 553.

Howard Flight: I want to address a point on new clause 2 to which amendment (a) relates. The new clause introduces anti-avoidance measures about which there is no disagreement on either side of the House or in the marketplace. I understand that it has an unintended effect that will impact on arrangements for long-term saving available to companies by means of which they can provide a method for their employees to invest in a spread of equities or other securities held in authorised open-ended investment companies where tax avoidance is not an issue or a motive.
 Those plans have been developed to encourage long-term saving together with the Financial Services Authority. The problem is that subsection (5) will bring any investment gains arising from an employee's savings into charge to income tax with corresponding reductions required under pay as you earn, and indeed 
 a national insurance charge. That is in circumstances where any such gains result purely from stock market appreciation, rather than any action by the employee or the employer, regardless of the fact that the employee may have left the employment some years ago. 
 That is because the shares in question were originally acquired by reason of employment—in other words the action of the employing company in sponsoring the savings plan—even though the individuals concerned are not employees of the open-ended investment company, and because the requirement under the savings plan for employees to keep the OEIC shares for the long term—typically a minimum of 10 years—means that they fall within the definition of restricted securities. The solution in amendment (a) is to exclude from the charge shares that have been held for more than seven years. That would not limit the effect of the clause in preventing the abuse at which it is aimed. 
 I understand that there was a not dissimilar issue in connection with the original legislation on restricted securities back in 1972. That issue concerned employee savings plans sponsored by companies. Under the arrangement, the company purchased units, in authorised unit trusts, for its staff. Such plans were strictly caught by section 79 of the Finance Act 1972. When that position became apparent, the then Government introduced an amendment to the legislation by way of section 40 of the Finance Act 1984. That broadly provided that, in the case of any investment by the unit trust in the employer's shares that did not exceed 10 per cent. by value, the acquisition of such units by employees through the savings plan was to be excluded from the growth-in-value charge that would otherwise have arisen under section 79. In other words, it was accepted that any gain on the employees' savings should properly be subject to capital gains tax and not to income tax. 
 I trust that the Paymaster General and the Revenue are already aware of this unintended problem. If the Government do not like the amendment that we have come up with to solve it, I hope that she will tell the Committee by what other means it will be solved.

David Laws: As I understand it, and as the hon. Gentleman has just set out, the new clause is intended to deal with avoidance problems that have arisen recently, particularly in relation to remuneration schemes. As such, we strongly support it. However, I hope that when the Paymaster General responds she can tell us whether tax revenues have already been lost as a consequence of those avoidance schemes. If they have, I hope that she can quantify that loss.
 It is depressing that we continue to have to deal with such avoidance schemes. When I was working in the City of London more than 10 years ago, I used to receive my annual bonus payments in all sorts of bizarre forms—they were entirely legal, I might add. Each year it changed. I was given shares that never seemed to go up or down in value, and fine wine. Before I was there, people were given gold bullion. All sorts of items were used to evade paying national insurance contributions. 
 As soon as I transferred from the City to advising the Liberal Democrat Treasury team on such matters, I was able to give them the benefit of my experience. I suggested that there should not be one-off solutions to closing down the loopholes, and that instead the Government should legislate in a way that would deal with them once and for all. One of the proposals was to extend employers' national insurance contributions to all benefits in kind, which were the benefits that were being abused at that time. The then Chancellor, the right hon. and learned Member for Rushcliffe (Mr. Clarke), rejected that proposal out of hand in his emergency Budget, when he had to fill the hole left by VAT on fuel. 
 I am pleased that the current Chancellor extended employers' national insurance contributions to all benefits in kind, rather than dealing with each and every scheme as it came up. However, now we are back to having to deal with remuneration-related avoidance schemes. The question is not only how much money has been lost—how much tax avoidance there has been—but why we continue to have to legislate year after year to deal with such avoidance schemes. 
 I am not clear from the explanatory note whether the problem has arisen because the Government have introduced new measures to encourage employee share ownership, which have been abused, and whether it results from too many new tax reliefs and allowances that open up opportunities for abuse. If that is the case, the question is whether the Government should be more careful in introducing such reliefs in the future. I shall not revisit old arguments about film industry tax relief, but there are similarities. 
 If that is not the problem in this case, surely we must consider whether we can introduce legislation specifically to address avoidance of income tax and national insurance contributions on remuneration in a way that will deal with the matter once and for all, rather than requiring new legislation every year while, in the meantime, the Exchequer loses tax. I hope that the Paymaster General will be able to comment on that.

John Butterfill: Before the Minister replies, let me say that I hope that this will not develop into a debate on all the historic avoidance devices that have been engineered by individuals in the City. Having spent many years there myself, I am well aware that there is no end to their ingenuity.

Dawn Primarolo: I sigh. I want to say, ''Oh, dear.'' Where has the hon. Member for Yeovil (Mr. Laws) been since the Committee began diligently scrutinising the Finance Bill in May? Indeed, why was he not here on Tuesday, when we discussed disclosure? Why has he not read the Hansard for that sitting, which, again, he could not attend? If he had, he would know the answer. He would be aware of the Government's proposals to tackle the issues that his experience—as opposed to his knowledge—tells him must be
 addressed. I shall share with the Committee only briefly how the Government became aware of avoidance in this area.
 Last year, we had a long discussion on schedule 22, which rewrote the criteria for Government-approved tax-relieved employee share plans. Indeed, I seem to remember that at that time the Government were told that they were being too tight—both with taxpayers' money and in the drafting of the legislation—in the matter of allowing reliefs. 
 Two of the avoidance schemes that are being closed by the new clauses were drawn to our attention by professionals blowing the whistle on fellow practitioners. I can do no better than to quote one of the people who provided such information: 
 ''I have noticed increasingly that whenever specific anti-avoidance provision is enacted, unscrupulous and highly paid accountants and lawyers will come up with some new scheme to get round it so their wealthier clients''— 
apparently the hon. Member for Yeovil used to be one— 
''can pay less tax, leaving those with less money no choice but to pay the full tax due on their income.'' 
My discussion on Tuesday with the hon. Members for Arundel and South Downs and for Torridge and West Devon (Mr. Burnett), who was here, on the disclosure clauses addressed precisely that point. How can the Government get ahead of the game? What must we do to encourage people to behave in a more acceptable fashion? 
 Let me turn specifically to amendment (a). I understand the position of the hon. Member for Arundel and South Downs, but let me assure him that there are no unintended effects. He made the point himself that the new clause is about employee share schemes and he referred to individuals not employed by the company that provides the scheme. He said it himself: the tax relief arises if one is working for the company and if it is an employee share ownership scheme. Therefore, income invested in the savings plan should not come from taxed income after the restrictive regime has applied. Unfortunately, it is clear that the amendment would result in before-tax income being available for the employee to invest. 
 I understand that the amendment relates to an arrangement promoted last year as a long-term savings scheme by a firm of accountants. The scheme provides for employees to put their gross pre-tax salary aside into stock market investment through a special purpose fund vehicle. The scheme is designed to take advantage of a relieving provision in part 7 of the Income Tax (Earnings and Pensions) Act 2003 to enable the value to pass free of tax and national insurance.The relieving provision is intended to cover limited circumstances in which the benefit to the employee is incidental to a wider reorganisation in the company, where the majority of the shareholders are not employees, so the benefit does not pass to the employees by reason of employment. That is not the case where a special purpose vehicle is used to promote employee savings. 
 The hon. Member for Yeovil told the Committee of his own experience of receiving pay in interesting and creative forms. The ingenuity of those who design 
 these schemes apparently knows no bounds, even when they know what the provisions entitle them to. This goes back to our discussions on disclosure. Obtaining a tax advantage in certain prescribed circumstances, and this is one, is clearly not avoidance; obtaining a tax advantage in a way that is not prescribed is avoidance. That is what we are talking about here and what we will deal with. 
 I share the disappointment of the hon. Member for Yeovil that people continue to use such schemes. He asked how much revenue we had already lost. I can only report to the Committee what the Inland Revenue has been told: about £300 million in remuneration has already been put through the gilts scheme, and £20 million in one company alone. Tax and national insurance forgone alone amount to £150 million each year. 
 We are not mind readers, but as the legislation went through this Committee as well and was fully consulted on, and although it is regrettable that we must rely on information about other professionals being passed to the Revenue in this case, I sincerely hope that, once the disclosure procedure is working, the frustration voiced by the hon. Gentleman and other members of the Committee about the constant need for anti-avoidance measures will have been relieved. He must also say whether his party would do away with tax relief for employee share schemes. I doubt it. I am sure he will agree that, given the choices before the Government and the powers that we have, we should defend that revenue now that the information is available. 
 If the hon. Member for Arundel and South Downs presses the amendment to a Division, I shall ask the Committee to reject it.

David Laws: I resent the Paymaster General's tone. We are talking about the 10 years ago since I left the City of London, time during which she has been serving in Finance Bill Committees. My point was designed to be helpful to the Treasury.
 For a prolonged period, under Conservative and Labour Governments, the Treasury has consistently failed to close such loopholes. It has failed for two reasons. First, it has been consistently unimaginative in introducing legislation to anticipate loopholes. Instead, the loopholes have to be closed afterwards. The proposal that was eventually introduced to extend employers' national insurance contributions to all benefits in kind is a model of that type. Secondly, the Paymaster General has not recognised the fact that if the Government continue to introduce tax breaks that allow innovative individuals in the tax avoidance industry to exploit such loopholes, we shall no doubt return to the same debate year after year.

Dawn Primarolo: The hon. Gentleman is quite right that I have served on Finance Bill Committees under two Governments—a total of 10 Finance Bills, yet I cannot recollect one occasion when the Liberal Democrats advanced a solution. Indeed, I can remember the party voting against anti-avoidance
 proposals. If the hon. Gentleman has a proposal, we would like to hear about it. It is not a matter of party politics. It is about the defence of revenue for the good of all taxpayers.

David Laws: I shall not steer too far away from the subject of the debate, Sir John, but the Paymaster General is entirely wrong in suggesting that we have not proposed measures to close avoidance opportunities. I refer to 1994—four or five years before a Labour Government eventually decided to close the avoidance on national insurance contributions and benefits in kind—when the Treasury kept on closing down individual schemes, rather than dealing with the whole problem. I refer also to our comments about avoidance opportunities in film industry tax relief—comments that were made at the time, not later.
 Finally, in relation to the Paymaster General's somewhat intemperate comments—you can always tell when the right hon. Lady is in trouble, Sir John, because she speaks intemperately—the record will show that I have attended at least as many sittings over the past month and a half as she has done.

Howard Flight: I am clearly a rather dull creature; never in my 30 years in the City have I participated in one of those benefits in kind bonuses. I used to hear about them, though.

Dawn Primarolo: I am not at all surprised to hear that, because the hon. Gentleman is thoroughly genuine, honest and straightforward. I know that he would tell the Revenue if he had received one.

Howard Flight: Yes, I would probably sneak on a competitor.
 I observe that there are two highly important factors in the game of avoidance and anti-avoidance. The first is the level of taxation. When I worked in Hong Kong, where taxes were much lower, there was broad consent about paying a modest level of tax. All Governments have to realise that if taxes are substantial, people will do their best to limit their tax liabilities.

Dawn Primarolo: Is the hon. Gentleman seriously suggesting that our higher rate of tax of 40 per cent. is not modest, and that it is too high?

Howard Flight: I think that the Paymaster General is deliberately misinterpreting me. I am saying that tax avoidance is not an issue in areas that have low taxation. Obviously, 40 per cent. is a favourable rate of tax in comparison with many of our inefficient EU-economy partners. It is high relative to Hong Kong.
 The key point is that the Paymaster General said that the savings schemes that the measures impact on—which are separate from remuneration anti-avoidance measures—are, in the Government's view, taking advantage of measures in the last Finance Bill that the Government do not want to encourage. Therefore, far from being unintended, it is intended that the measures in new clause 2 affect those savings schemes. I think that that was not understood by the organisations that put in place those schemes, so it is important that it be cleared up. 
 There is no point in the amendment if it is the deliberate intention thus to tax those saving schemes. What strikes me as somewhat strange is that the schemes have, generally, been put in place with the knowledge of the authorities and of the Financial Services Authority. It might have been helpful if it had been communicated earlier, right up front if possible, that the schemes were not intended. 
 Question put and agreed to. 
 Clause read a Second time, and added to the Bill.

New Clause 3 - Restricted securities with artificially depressed value

'(1) Section 446E of the Income Tax (Earnings and Pensions) Act 2003 (c.1) (employee securities with artificially depressed market value: charge on restricted securities) is amended as follows. 
 (2) In subsection (1), after ''on restricted securities),'' insert— 
 ''(aa) immediately before the employment-related securities are disposed of (in circumstances which do not constitute such an event) or are cancelled without being disposed of,''. 
 (3) For subsections (3) to (6) substitute— 
 ''(3) ''The relevant period'' is the period beginning— 
 (a) if section 425(2) (no charge on acquisition of certain restricted securities or restricted interests in securities) applied in relation to the employment-related securities, 7 years before the acquisition, and 
 (b) in any other case, 7 years before the relevant date, 
 and ending with the relevant date. 
 (4) ''The relevant date'' is— 
 (a) in a case within subsection (1)(a), the date on which the chargeable event concerned occurs, 
 (b) in a case within subsection (1)(aa), the date on which the disposal or cancellation concerned occurs, and 
 (c) in a case within subsection (1)(b), the 5th April concerned. 
 (5) Where this section applies in a case within subsection (1)(aa) or (b), a chargeable event within section 427(3)(a) (lifting of restrictions) is to be treated as occurring in relation to the employment-related securities on the relevant date. 
 (6) In every case where this section applies, subsection (1) of section 428 (amount of charge on restricted securities) applies as if the reference in subsection (2) of that section to what would be the market value of the employment-related securities immediately after the chargeable event but for any restrictions were to what would be their market value at the appropriate time but for the matters to be disregarded. 
 (7) ''The appropriate time'' is— 
 (a) in a case within subsection (1)(a) or (b), the time immediately after the chargeable event concerned, and 
 (b) in a case within subsection (1)(aa), the time immediately before the chargeable event concerned. 
 (8) ''The matters to be disregarded'' are— 
 (a) any restrictions, 
 (b) the things done as mentioned in subsection (2), and 
 (c) if the employment-related securities are about to be disposed of or cancelled, that fact. 
 (9) Where this section applies in a case within subsection (1)(aa), section 428(1) applies with the omission of the reference to OP. 
 (10) Where this section applies in a case within subsection (1)(a) and the chargeable event concerned is within section 427(3)(c) (disposal for consideration), section 428 applies with the omission of subsection (9) (case where consideration is less than actual market value).'' 
 (4) This section applies on and after 7th May 2004.
 (5) But if the employment-related securities were acquired before that date, section 446E does not apply by virtue of the amendment made by subsection (2) of this section unless their market value would be artificially low immediately before the disposal or cancellation if the date on which the relevant period began were the later of— 
 (a) that on which it did begin, and 
 (b) 7th May 2004.'. 
 —[Dawn Primarolo.] 
 Brought up, read the First and Second time, and added to the Bill.

New Clause 12 - Relationship with chargeable gains

'(1) Subsection (3) below applies if— 
 (a) section 125 applies as a result of a receipt on or after 17 March 2004, by a company that is or has been a member of a partnership, of any consideration for a disposal on or after that date of all or any of its interest in the partnership (''the section 125 disposal''); 
 (b) a chargeable gain accrues to the company on a relevant disposal; and 
 (c) the total amount of chargeable gains accruing to the company on relevant disposals exceeds the total amount of any allowable losses accruing to it on such disposals. 
 (2) References in this section to a ''relevant disposal'' are to any disposal of an asset that, alone or together with other disposals of assets, constitutes the section 125 disposal; and references in this subsection to a disposal of an asset are to be construed in accordance with the 1992 Act. 
 (3) Where this subsection applies— 
 (a) any chargeable gain accruing to the company on a relevant disposal must be excluded in computing, for the purposes of section 8(1) of the 1992 Act, the total amount of chargeable gains accruing to the company in the accounting period in which that gain accrued; 
 (b) the relevant net gain (defined by subsection (4) below) must be included in computing for those purposes the total amount of chargeable gains accruing to the company in the accounting period in which the receipt mentioned in subsection (1) above occurred; and 
 (c) any allowable loss accruing to the company on a relevant disposal must be excluded in computing for the purposes of section 8(1) of the 1992 Act the amount of any allowable losses. 
 (4) To find ''the relevant net gain'' for the purposes of this section— 
 (a) take the amount by which the total amount of chargeable gains accruing to the company on relevant disposals exceeds the total amount of allowable losses accruing to it on such disposals; and 
 (b) reduce it (but not below nil) by an amount equal to the chargeable amount. 
 (5) Where section 125 applies as mentioned in subsection (1)(a) above, in computing any chargeable gain or allowable loss accruing to the company on a relevant disposal— 
 (a) neither the chargeable amount, nor any amount taken into account in computing it, shall be excluded by section 37(1) of the 1992 Act (exclusions from consideration); and 
 (b) an amount that has been taken into account in computing the chargeable amount shall not by reason of that fact be excluded by section 39(1) of that Act (exclusions from allowable deductions). 
 (6) If section 125 and this section apply more than once as a result of two or more receipts by a company of consideration relating to the same section 125 disposal— 
 (a) subsection (3)(b) above does not apply in relation to any of the receipts after the first; and 
 (b) in relation to the first receipt, the amount to be deducted under subsection (4)(b) above is an amount equal to the total of the chargeable amounts found in relation to the receipts.
 (7) Subsection (8) below applies if subsection (3) above prevents an allowable loss that accrued to a company otherwise than on a relevant disposal from being deductible from a chargeable gain accruing to the company on a relevant disposal. 
 (8) That loss (to the extent that it has not been deducted from any other chargeable gain) shall instead be deductible from the total amount of chargeable gains accruing to the company in the accounting period in which the receipt mentioned in subsection (1) above occurred. 
 (9) But if, in any case where subsection (3) above applies, there are one or more allowable losses— 
 (a) that are losses to which section 18(3) of the 1992 Act applies, and 
 (b) that accrued to the company otherwise than on a relevant disposal and are prevented by subsection (3) above from being deductible from a chargeable gain accruing to the company on a relevant disposal, 
 the total amount deducted under subsection (8) above in respect of those losses must not exceed the relevant net gain. 
 (10) In this section— 
 ''the 1992 Act'' means the Taxation of Chargeable Gains Act 1992 (c.12); 
 ''the chargeable amount'' means the amount found under section 125 in relation to the receipt mentioned in subsection (1) above; and 
 references to chargeable gains, or allowable losses, accruing on disposals are to be construed in accordance with the 1992 Act.'.—[Dawn Primarolo.] 
 Brought up, read the First and Second time, and added to the Bill.

New Clause 16 - Valuation assumptions

'For the purposes of this Part the valuation assumptions in relation to a person and any benefits are— 
 (a) if the person has not reached such age (if any) as must have been reached to avoid any reduction in the benefits on account of age, that the person reached that age on the date, and 
 (b) that the person's right to receive the benefits had not been occasioned by physical or mental impairment.'.—[Dawn Primarolo.] 
 Brought up, read the First and Second time, and added to the Bill.

New Clause 17 - Premium Bonds

'Regulations under section 11 of the National Debt Act 1972 (c.65) (power of Treasury to make regulations as to raising of money under auspices of Director of Savings) may repeal any provision contained in section 54 of, or Schedule 18 to, the Finance Act 1968 (c.44) (terms of issue of premium savings bonds).'.—[Ruth Kelly.] 
 Brought up, and read the First time. 
 Motion made, and Question proposed, That the clause be now read a Second time.

Andrew Tyrie: This is a very interesting but minor clause, which should detain us for about six minutes. As I understand it, it only provides the Treasury with the power to vary the terms under which the product is offered to the customer. It does not, as I was initially concerned when I first read it, enable it fundamentally to alter the shape of a premium bond and the type and range of products that may be made available. I should
 like the Minister to confirm that important point. As she will probably know, some people consider even premium bonds to be an unacceptable form of gambling. Indeed, Harold Wilson described them as such.
 Now, of course, measures to deregulate gambling have been advanced—we do not know whether the gambling Bill will be introduced. It crossed my mind when I saw this clause that it could be part of a wider set of proposals to enable the Government to engage more directly in the gambling sector. As it happens, I would not in principle be against a widening of the structure of premium bonds, but if that were to be undertaken it would merit serious debate. 
 As it stands, we accept the measure, although I should like the Minister to confirm the point that I have just made about the limit of its scope. I note the increased importance of premium bonds in Government funding; no doubt that is why the clause has been introduced. The Government will need to raise a good deal more money, as the Red Book has shown—perhaps more even than they have set out; if I had to bet, I would do so on that side of the line. The importance of premium bonds has doubled over the past 12 months as a source of funding for the Debt Management Office; I think that I am correct in saying that it has increased from about £4 million to about £8 million. They now account for about 20 per cent. of total national savings activity, or about 7 or 8 per cent. of total funding. What was almost an irrelevant issue not too many years ago, for a Government who were not borrowing much money, is now quite an important one, so any alteration in the terms is presumably targeted at trying to obtain more custom. Certainly, the Government will need to get more custom in. 
 I should be grateful if the Minister could confirm that I have correctly understood the clause, as the explanatory notes were not terribly clear. I did not have a chance, although I tried, to read the original legislation—the National Debt Act 1972 and the Finance Act 1968—to make absolutely sure that the clause will do what I think it is going to do. There is an inherent tension between any form of gambling instrument that is outside Government activity on the one hand, and premium bonds on the other. It was widely held that the creation of a national lottery would be very damaging to premium bonds. As it happens, the statistics are ambiguous on that. Although the rate of increase for premium bond take-up slowed, it certainly did not fall when the lottery was introduced. 
 I should be grateful if the Minister could dwell on what her longer-term proposals for premium bonds are, as well as confirming my earlier point.

Stephen Pound: I support what the hon. Gentleman says, as there are concerns across the House on this issue. He quoted the late Sir Harold Wilson, and the late Baroness Thatcher was equally concerned about the issue—[Hon. Members: ''She is not late.'']—Sorry, the former Member of this House who is now Baroness Thatcher, with whom I
 entirely agreed on this subject. I agreed with her on only one other occasion, and that was with her opinion of the Conservative Cabinet at a particular time.
 The hon. Member for Chichester mentioned the lottery, and I am concerned that avaricious eyes are being cast at premium bonds, which are a successful mechanism and are widely supported, going with the grain of the nation—there are none of the problems of aggressive selling or the difficulties associated with the lottery. Like many people, I am concerned that the integrity of premium bonds should remain unchallenged. I look with confidence to the Minister for assurance; perhaps she could underscore the fact this is a cross-party concern. 
 I apologise for killing the former Prime Minister.

Ruth Kelly: It might be helpful to start by briefly exploring the remit of National Savings and Investments, which is to raise cost-effective financing for the Government. It does so by selling a range of products to savers and investors. In the last financial year, National Savings and Investments contributed £3.4 billion to net financing. The most popular National Savings and Investments product is the premium bond—23 million customers have bought premium bonds, investing £24 billion. It is the main contributor to NSI's net financing target.
 I hope that I can reassure both my hon. Friend the Member for Ealing, North (Mr. Pound) and the hon. Member for Chichester that the premium bond product remains as provided for by section 11 of the National Debt Act 1972. Premium bonds were created by the Finance Act 1956, which is not affected by the clause that we are debating. I hope that that puts some of their concerns to rest. 
 National Savings and Investments has embarked on a wide-ranging modernisation programme, and one of its objectives is to re-examine and update premium bonds. The new clause will give it the flexibility that it needs and enable it to carry out the results of its review. I know that my hon. Friend is interested in the factors that it may consider in that review, and I assure him that they are intended to meet customer need better rather than to change fundamentally the nature of premium bonds. 
 As with all its products, National Savings and Investments wants to review premium bonds in the light of customer feedback. Changes in the retail financial services market have an impact on premium bonds as they do on other products, and it wants to ensure that the product continues to meet customer need. For example, it may want to reconsider the need to give three months' notice of a change in the prize fund rate, which is clearly out of step with today's financial services market, in which customers expect their financial provider to react immediately to changes in base rates. 
 Another issue for consideration is that National Savings and Investments has a solely paper-based application system. It may wish to consider giving customers greater choice in how they invest—over the telephone, for example. It may consider whether it needs to publish winning numbers in the London Gazette—there are about a million winning numbers 
 each month. It may consider using its website to inform people if they have won a prize. Those seem to be sensible factors to be considered in a review. I hope that I have reassured my hon. Friend and other hon. Members that the proposals are relatively straightforward and will not undermine premium bonds. 
 Question put and agreed to. 
 Clause read a Second time, and added to the Bill.

New Clause 18 - Partnerships exploiting films

'After section 118ZK of the Taxes Act 1988 (inserted by section 119) there is inserted— 
 ''Partnerships exploiting films 
118ZL Partnerships exploiting films 
(1) Where (apart from this section) an amount may be given to an individual under section 380 or 381 in respect of a loss (''the loss in question'') sustained by him— 
 (a) in a trade consisting of or including the exploitation of films, and 
 (b) in an affected year of assessment, 
 none of that amount may be given otherwise than against income consisting of profits arising from the trade; but this is subject to subsection (4). 
 (2) An ''affected year of assessment'' means a year of assessment at any time during which the individual carried on the trade in partnership which is also— 
 (a) the year of assessment in which the trade is first carried on by him or any of the next three years of assessment, 
 (b) a year of assessment in which he did not devote a significant amount of time to the trade, and 
 (c) a year of assessment at any time during which there existed a relevant agreement guaranteeing him an amount of income. 
 (3) For the purposes of subsection (2)(c)— 
 (a) ''a relevant agreement'' means— 
 (i) an agreement that was made with a view to the individual's carrying on the trade or in the course of his carrying it on (including any agreement under which he is or may be required to contribute an amount to the trade), or 
 (ii) an agreement related to an agreement falling within sub-paragraph (i), 
 (b) an agreement ''guarantees'' the individual an amount of income if the agreement, or any part of it, is designed to secure the receipt by the individual of that amount (or at least that amount) of income, and 
 (c) it is immaterial when the amount of income would be received under the agreement. 
 (4) If the loss in question derives to any extent from exempt expenditure, amounts that (apart from this section) may be given under section 380 or 381 in respect of the loss otherwise than against income consisting of profits arising from the trade may be so given to the extent that the total of the amounts so given does not exceed the exempt part of the loss. 
 (5) The exempt part of the loss is so much of the loss in question as derives from exempt expenditure. 
 (6) Expenditure is exempt expenditure for the purposes of this section if it is— 
 (a) expenditure incurred before 26 March 2004 in a case where this paragraph applies, or 
 (b) expenditure that, for the purposes of the computation required by section 111(2), was deducted under section 41 or 42 of the Finance (No. 2) Act 1992, or
 (c) incidental expenditure that, although deductible apart from section 41 or 42 of that Act, was incurred in connection with the production or acquisition of a film in relation to which expenditure was deducted under either of those sections. 
 (7) Subsection (6)(a) applies where the individual carried on the trade before 26 March 2004. 
 118ZM Partnerships exploiting films: supplementary 
 (1) In section 118ZL and this section any reference to a film is to be construed in accordance with paragraph 1 of Schedule 1 to the Films Act 1985. 
 (2) Section 118ZH (meaning of ''a significant amount of time'' etc) applies for the purposes of section 118ZL as it applies for the purposes of section 118ZE. 
 (3) For the purposes of section 118ZL(3) agreements are related if they are entered into in pursuance of the same arrangement (regardless of the date on which either agreement is entered into). 
 (4) The reference in section 118ZL(6) to the acquisition of a film is a reference to the acquisition of the master negative or any master tape or master disc of the film; and this subsection is to be construed in accordance with section 43(1) and (2)(b) of the Finance (No. 2) Act 1992. 
 (5) In section 118ZL(6) ''incidental expenditure'' means expenditure on management, administration or obtaining finance. 
 (6) The part of the loss in question that derives from exempt expenditure shall be determined on such basis as is just and reasonable. 
 (7) The extent to which any expenditure falls within section 118ZL(6)(c) shall be determined on such basis as is just and reasonable. 
 (8) In any case where sections 380 and 381 have effect as mentioned in section 118ZD(2) or 118ZI(3) (cases where sections 380 and 381 have effect as if loss carried forward from earlier year sustained in subsequent year), section 118ZL also has effect as mentioned in section 118ZD(2) or (as the case may be) section 118ZI(3).'''.—[Dawn Primarolo.] 
 Brought up, read the First and Second time, and added to the Bill.

New Clause 19 - Approved plans and schemes

'(1) The Income Tax (Earnings and Pensions) Act 2003 (c.1) is amended as follows. 
 (2) Omit section 421G (exclusion from Chapters 2 to 4 of Part 7 of shares awarded or acquired under approved plan or scheme). 
 (3) In Chapter 2 of Part 7 (restricted securities), after section 431 insert— 
 ''431A Shares under approved plan or scheme 
 (1) Where employment-related securities are restricted securities or a restricted interest in securities, the employer and the employee are to be treated as making an election under section 431(1) in relation to the employment-related securities if they are shares, or an interest in shares, to which this subsection applies. 
 (2) Subsection (1) applies to— 
 (a) shares awarded or acquired under an approved share incentive plan (within the meaning of Chapter 6 of this Part) in circumstances in which (in accordance with section 490) no liability to income tax arises, 
 (b) shares acquired by the exercise of a share option granted under an approved SAYE option scheme (within the meaning of Chapter 7 of this Part) in circumstances in which (in accordance with section 519) no liability to income tax arises,
 (c) shares acquired by the exercise of a share option granted under an approved CSOP scheme (within the meaning of Chapter 8 of this Part) in circumstances in which (in accordance with section 524) no liability to income tax arises, and 
 (d) shares acquired by the exercise of a qualifying option within the meaning of section 527(4) (enterprise management incentives) in circumstances in which (in accordance with section 530) no liability to income tax arises.'' 
 (4) In section 489 (operation of tax advantages in connection with approved share incentive plans), after subsection (3) insert— 
 ''(4) And those sections do not apply if the main purpose (or one of the main purposes) of the arrangements under which the shares in question are awarded or acquired is the avoidance of tax or national insurance contributions.'' 
 (5) In sections 505 and 506 (charge on shares ceasing to be subject to approved share incentive plan), after subsection (4) insert— 
 ''(4A) Any tax due under subsection (2) or (3) is reduced by the amount or aggregate amount of any tax paid by virtue of Chapter 3B of this Part in relation to the shares.'' 
 (6) In section 519(1) (approved SAYE option schemes: no charge in respect of exercise of option) insert at the end ''and 
 (c) the avoidance of tax or national insurance contributions is not the main purpose (or one of the main purposes) of any arrangements under which the option was granted or is exercised.'' 
 (7) In section 524(1) (approved CSOP schemes: no charge in respect of exercise of option) insert at the end ''and 
 (c) the avoidance of tax or national insurance contributions is not the main purpose (or one of the main purposes) of any arrangements under which the option was granted or is exercised.'' 
 (8) Section 701 (PAYE: meaning of ''asset'') is amended as follows. 
 (9) In subsection (2)(c)— 
 (a) in sub-paragraph (ia), for the words after ''employee'' substitute ''under a scheme approved under Schedule 4 (approved CSOP schemes) in circumstances in which Condition A or B as set out in section 524(2) or (2A) is met;'', 
 (b) omit sub-paragraph (ii), and 
 (c) in sub-paragraph (iii), after ''1996'' insert ''where the avoidance of tax or national insurance contributions is not the main purpose (or one of the main purposes) of any arrangements under which the right was obtained or is exercised''. 
 (10) After subsection (3) insert— 
 ''(3A) Paragraph (c) of subsection (2) does not apply to shares after their acquisition as mentioned in that paragraph.'' 
 (11) This section has effect on and after 18th June 2004 and (so far as it does not relate to the award or acquisition of shares) applies in relation to shares awarded or acquired before that date as well as in relation to those awarded or acquired on or after that date. 
 (12) Where section 431A(1) of the Income Tax (Earnings and Pensions) Act 2003 (c.1) (as inserted by subsection (3)) has effect (by virtue of subsection (11)) in relation to shares acquired before 18th June 2004, it applies in relation to them so as to treat an election under section 431(1) of that Act as made in relation to them on that date. 
 (13) For the purposes of the application of Chapter 3B of Part 7 of that Act (securities with artificially enhanced market value) by reason of subsections (2) and (11) in relation to shares acquired before 18th June 2004, section 446O of that Act (meaning of ''relevant period'') has effect as if they were acquired on that date.'. 
 —[Dawn Primarolo.] 
 Brought up, read the First and Second time, and added to the Bill.
 New Clause 20 Shares acquired on public offer

New Clause 20 - Shares acquired on public offer

'(1) Section 421F of the Income Tax (Earnings and Pensions) Act 2003 (c.1) (exclusion from Chapters 2 to 4 of Part 7 of shares acquired under terms of offer to the public) is amended as follows. 
 (2) In subsection (1), for ''Chapters 2 to 4'' substitute ''Chapters 2, 3 and 3C''. 
 (3) After that subsection insert— 
 ''(1A) But subsection (1) does not disapply those Chapters if the main purpose (or one of the main purposes)— 
 (a) of the arrangements under which the right or opportunity under which the shares were acquired, or 
 (b) for which the shares are held, 
 is the avoidance of tax or national insurance contributions.'' 
 (4) This section has effect on and after 18th June 2004 and applies in relation to shares acquired before that date as well as in relation to those acquired on or after that date. 
 (5) For the purposes of the application of Chapter 3B of Part 7 of the Income Tax (Earnings and Pensions) Act 2003 (c.1) (securities with artificially enhanced market value) by reason of subsections (2) and (4) in relation to shares acquired before that date, section 446O of that Act (meaning of ''relevant period'') has effect as if they were acquired on that date.'.—[Dawn Primarolo.] 
 Brought up, read the First and Second time, and added to the Bill.

New Clause 21 - Associated persons etc.

'(1) Part 7 of the Income Tax (Earnings and Pensions) Act 2003 (c.1) (employment income: securities) is amended as follows. 
 (2) In section 421C(2) (meaning of ''relevant linked person'' for purposes of Chapters 1 to 4), for ''are connected or, although not connected, are'' substitute ''are or have been connected or (without being or having been connected) are or have been''. 
 (3) In section 472(2) (meaning of ''relevant linked person'' for purposes of Chapter 5), for ''are connected or, although not connected, are'' substitute ''are or have been connected or (without being or having been connected) are or have been''. 
 (4) In section 477(3)(c) (chargeable events in relation to employment-related securities options), for the words after ''benefit'' substitute ''in connection with the employment-related securities option (other than one within paragraph (a) or (b)).'' 
 (5) This section has effect on and after 18th June 2004 and applies in relation to securities, interests and options that were employment-related securities or employment-related securities options on that date (as well as those acquired on or after that date).'.—[Dawn Primarolo.] 
 Brought up, read the First and Second time, and added to the Bill.

New Clause 22 - Power of Board to specify form and manner in which information is provided under Part 7

'The information required by section 292(1) or (3), 293(1), 294, 296(1) or 297(1) must be provided in a form and manner specified by the Board.'.—[Dawn Primarolo.] 
 Brought up, read the First and Second time, and added to the Bill.

Column Number: 770

New Clause 4Expenditure incurred on assets leased by small or medium-sized enterprise

Expenditure incurred on assets leased by small or medium-sized enterprise

'(1) The Capital Allowances Act 2001 is amended as follows. 
 (2) For subsection 44(1), substitute— 
 ''(1) Expenditure is first-year qualifying expenditure if— 
 (a) it is incurred by a small or medium-sized enterprise, or 
 (b) it is incurred by a lessor on equipment leased to a small or medium-sized enterprise, and 
 (c) it is not excluded by subsection (2) or section 46 (general exclusions).'' 
 (3) In the table in subsection 52(3) insert in the second and third lines after ''small or medium-sized enterprises''— 
 ''or incurred by a lessor on equipment leased to a small or medium-sized enterprise''.'.—[Mr. Flight.] 
 Brought up, and read the First time.

Howard Flight: I beg to move, That the clause be read a Second time.
 We have tabled new clauses 4 and 5 at the request of the CBI. New clause 4 provides for the first year allowances available under the Capital Allowances Act 2001 for assets purchased by small or medium-sized companies to be available also for assets that such companies lease. The Government's increases under the Companies Act 1985 in the small and medium-sized enterprises thresholds have been welcomed throughout and should substantially increase the number of companies able to qualify for first year allowances for plant and machinery, but SMEs that lease plant and machinery do not currently benefit from first year allowances. 
 The evidence from the surveys undertaken by the CBI shows that the performance of the SME sector is lagging behind the trend of economic recovery. In manufacturing, the level of investment would arguably benefit from further encouragement. Enhanced first year allowances might therefore be extended to SMEs leasing plant and machinery, which would also help to address the productivity performance issue. 
 Asset finance, including leasing, is a crucial source of investment finance for SMEs. The Finance and Leasing Association estimates that over half its members' business finance goes to businesses with a turnover below £5 million. Over time, the revenue effect of such an extension should be neutral. In the case of assets leased by SMEs, it should be over a relatively short period. 
 I would welcome the Government's response to the new clause. I look forward to hearing their overall position on SMEs and on whether the arrangement should be extended to leasing.

John Healey: As the hon. Gentleman says, the intention of the new clause is to extend enhanced first year capital allowances for SMEs to expenditure by lessors, which are normally large businesses, on the equipment leased to SMEs. The advocates of that move generally argue that part of that benefit to lessors could be passed to SMEs, but nothing in the new clause would require them to do that. I am not convinced that any consequent reductions in rental
 costs to SMEs would be more than marginal. If that is right, the high Exchequer cost—almost £500 million over 3 years—would be entirely deadweight. That does not represent good value for money.
 We originally introduced the first year allowances to address the cash-flow constraints faced by smaller businesses and to provide a boost to small business investment. Smaller businesses that lease their plant and machinery do not face the same cash-flow problems because their rental payments are spread over the life of the lease. 
 As part of the ongoing reform of corporation tax, we are including the tax treatment of leased assets, and we will consider further whether the capital allowance system can be modernised in order to produce a regime that is modern and competitive. We explained that in regular meetings that we had with the Finance and Leasing Association, which was the main proponent of the new clause. The CBI is heavily involved in the corporation tax reform process, so it is also aware of the consideration that we are giving to these issues.

Howard Flight: I am glad that the Government are looking at addressing the underlying issue by other means, and I take on board the point that there is no guarantee that the leasing benefits would be passed on, although commercial forces argue in that direction. I beg to ask leave to withdraw the motion.
 Motion and clause, by leave, withdrawn.

New Clause 5 - Expenditure incurred in installing access ramps

(1) The Capital Allowances Act 2001 is amended as follows.
 (2) In section 23(2) after ''section 29 (fire safety)'' insert—
''29A (ramps for disabled access)''
 (3) After section 29 insert—
 ''29A Ramps for disabled access installed by small or medium-sized enterprises
 (1) This section applies to expenditure if a small or medium-sized enterprise carrying on a qualifying activity has incurred it in installing ramps required to facilitate access by disabled persons to premises which the small or medium-sized enterprise uses for the purposes of the qualifying activity.
 (2) A small or medium-sized enterprise installs ramps required to facilitate access by disabled persons if the installation is or will be required to comply with section 21 of the Disability Discrimination Act 1995.'.—[Mr. Flight.]
 Brought up, and read the First time.

Howard Flight: I beg to move, That the clause be read a Second time.

John Butterfill: With this it will be convenient to discuss new clause 13—Expenditure incurred in improving accessibility for disabled persons
 '(1) The Capital Allowances Act 2001 is amended as follows. 
 (2) In section 23(2) after ''section 29 (fire safety)'' insert— 
 ''29A (disabled access)''. 
 (3) After section 29 insert— 
 ''29A Disabled access
 (1) This section applies to expenditure if a person carrying on a qualifying activity has incurred it in making adjustments within subsection (2) below to premises which he uses for the purposes of the qualifying activity. 
 (2) The adjustments referred to in subsection (1) above are those specified in subsection (3) below which are or will be required to comply with section 21 of the Disability Discrimination Act 1995. 
 (3) The specified adjustments are— 
 (a) installation of ramps to facilitate either access to the premises or use of the premises by disabled persons, and 
 (b) alterations to the premises to provide accessible toilets for disabled persons.''.'.

Howard Flight: New clause 5 has been tabled at the request of the CBI. It provides for capital allowances under the Capital Allowances Act 2001 to be available for expenditure incurred by installing ramps to facilitate access by disabled persons in order to comply with section 21 of the Disability Discrimination Act 1995. I understand that new clause 13 in effect proposes the same measures.
 The Disability Discrimination Act imposes a duty from 1 October on providers of services to take reasonable steps to facilitate disabled persons wishing to make use of their services. That extends to making physical alterations to premises used to provide services. 
 In many cases, alterations to premises made by businesses will not qualify for immediate tax relief against profits. Therefore, it is proposed that expenditure on ramps required to facilitate the use of premises by disabled persons should be classified for tax purposes as expenditure on plant and machinery, thus qualifying for capital allowances. That would follow the established precedent of capital allowances for fire safety expenditure. 
 I understand that research carried out by the Disability Rights Commission of the Department for Work and Pensions suggests that many businesses do not have plans to carry out the necessary alterations to their premises. It is therefore arguable that an incentive is needed to encourage action by the Government's deadline of 1 October if they wish that to be met.

David Laws: New clause 13 is very similar to new clause 5, although it is slightly wider in scope. It allows for the same reliefs in respect of alterations to premises to provide toilets that are accessible to disabled people, but it does not focus narrowly on the issue of small and medium-sized enterprises.
 The new clause was suggested by the CBI and the Disability Rights Commission, and is supported by them. The commission sent us a note on the issue on behalf of itself and the CBI, in which it states: 
 ''Our organisations believe this provision is vital to getting businesses ready for the October 2004 duties on physical access - without such incentives we fear progress will continue to be slow and disabled people will continue to be denied vital opportunities.'' 
Given the CBI's support for both the new clauses, it will not surprise you, Sir John, to know that my briefing note looks rather similar to that of the hon. Member for Arundel and South Downs. To save myself any embarrassment, I will not read out the same 
 comments as him, but I will highlight two points. First, there seems to be a precedent for using these particular capital allowances for purposes other than standard business investment. He cited the established precedent of capital allowances being used for fire safety precautions. 
 Secondly, a big move is under way to try to ensure that business premises and other premises with public access are accessible and disabled-friendly, although I suspect that there is an awfully long way to go, if the area in which I live is characteristic of the rest of the country. There is a lot of expensive work to be done to convert premises into disabled-accessible buildings with vital facilities such as accessible toilets. In light of the amount of investment going into that, and the difficulty with meeting Government targets, I hope that the Government will respond positively to these new clauses.

Ruth Kelly: As hon. Members are aware, the Government undertook, in their manifesto, to establish comprehensive and enforceable civil rights for disabled people, so in many respects we have no quarrel with the underlying motivation for the new clause. Hon. Members also know that the requirement on service providers to make their premises reasonably accessible will come into effect in October.
 After careful consideration of the proposed new clauses, we are not convinced that the proposed changes to the tax system would be the best way in which to improve rights for disabled people. Let me explain our reasoning. First, the new obligations will apply to all service providers, whether in the public, private or voluntary sector, so it could well be seen as unfair to give special financial support only to private sector businesses, particularly as it is often in businesses' financial interests to make such adjustments, as there are several million disabled people in the UK, and one in four customers is disabled. 
 Secondly, and perhaps of more interest to businesses, it is clear that many of the adjustments needed to meet the requirements of the Disability Discrimination Act, including some of the most expensive adjustments, already qualify for tax relief as either a revenue expense, or through capital allowances. The Inland Revenue is currently working on guidance to remind businesses about the tax relief available for the most common types of disability extension. That guidance will be available before the Act comes into force. 
 It is true that structural alterations to most commercial buildings are not covered by the capital allowances regime, but we are considering the possibility of introducing such an allowance for commercial buildings in the wider context of our ongoing corporate tax regime. To introduce special allowances at this late stage, when the Act has been in place for some years, could be seen as being unfair on businesses that have already made the necessary adjustments. 
 More generally, research to which hon. Members have already referred, which was commissioned by the Disability Rights Commission and the Department for 
 Work and Pensions and published in 2002, found that, although cost is a factor in the time that change is brought about and the manner in which it is implemented, it does not have a great influence on whether a change is made at all. 
 For those reasons, I urge the hon. Gentleman to withdraw the motion, and urge the Committee to reject the new clauses if they are pressed to a Division.

David Laws: The Financial Secretary has made a number of reasonable points about fairness to other service providers and to those people who have already spent money improving their capital stock to make it disabled accessible. I was interested in her comments that some forms of conversion for disabled accessibility may already be open to tax relief. We look forward to hearing about the date of the publication of some more detailed guidance on that. We hope that the Government will also soon introduce the relief in respect of commercial property that she mentioned. We may wish to return to this if possible on Report.

Howard Flight: I echo the hon. Gentleman's words. If I understood the Minister correctly, she confirmed that the Revenue would circulate guidance notes making it clear to businesses what is already available. Secondly, she said that the Government are looking at other ways of effecting some degree of tax deductibility, particularly for things like ramps to premises. I beg to ask leave to withdraw the motion.
 Motion and clause, by leave, withdrawn.

John Butterfill: There is a general feeling among the Committee that we would like to conclude this morning, if possible. That means that we may not have a great deal of time to devote to new clause 6.New Clause 6 Transfers of real property between joint occupiers

New Clause 6 - Transfers of real property between joint occupiers

'(1) The Inheritance Tax Act 1984 is amended as follows. 
 (2) After section 18 insert— 
 ''Transfers of real property between joint occupier 
 18A (1) A transfer on death shall be an exempt transfer to the extent that it comprises a part or whole share in an interest in real property that has been occupied as the main residence of the transferor and the transferees throughout the two years prior to the date of death. 
 (2) For the purposes of determining whether a property has been in the occupation referred to in paragraph (1) above, there shall be disregarded any absences during which either party has had to receive residential nursing care whether in hospital or a private facility.''.'.—[Mr. Flight.] 
 Brought up, and read the First time.

Howard Flight: I beg to move, That the clause be read a Second time.
 Hon. Members will be aware that Civil Partnership Bill enables those who enter into a civil partnership to qualify for the spouse exemption from inheritance tax. Two elderly ladies living together may, if they wish, 
 take out a civil partnership to get the IHT advantages. Two spinster sisters would not be able to do that because of the laws of consanguinity. 
 There are many people living in houses, particularly in the south-east, that are potentially of value way above the inheritance tax floor. As a point of principle, it falls very hard on two sisters who have lived together for a long time if, when one dies and there is no money to pay the IHT, the other is turned out of the house. Secondly, there is a slight issue that the civil partnership arrangement implies, dare I say it, sharing the same bed.

Dawn Primarolo: I just want to explain to the hon. Gentleman that the Civil Partnership Bill is about same sex partnerships. It is about the partnership as marriage. I do not know what he does in his marriage.

Howard Flight: I thank the Paymaster General for her educational comments. I was aware of the issue. The point that I making is that there is already a problem for two men or two women who have lived together for a long time, whatever their relationship. Because of property values, when one of them dies, the remaining partner may have to sell the house and move. Under the Civil Partnership Bill, if they choose to enter into a civil partnership contract, they will get the spouse allowance, but if they do not they will not—and if they happen to be two sisters, they are not allowed to anyway.
 The new clause is designed to achieve fairness. When people are living together—and there is a deliberate two-year qualification period introduced—they should enjoy the spouse allowance. Without it, we will move into an unfair situation where some people will benefit, some people will not, and the underlying problem will not be addressed. 
 In their press release for the Civil Partnership Bill, the Government made the point that it was social policy legislation and that tax consequences would be dealt with in the first available Finance Bill. This Finance Bill is available and our new clause is available, so I would like to hear the Economic Secretary support it, as the Government effectively promised to do.

John Healey: We all share sympathy for those people who have lost a companion with whom they have lived, but I cannot support the new clause.
 The hon. Gentleman mentioned two situations: same sex couples; and couples who do not live together as cohabiting couples but share a residence. In the first situation, I recognise that the exemption from inheritance tax for the transfer between spouses is not an option for same sex couples. We are changing that by legislating for civil partnerships, and we have made it clear that all civil partners will be treated for tax purposes consistently with married couples. We will legislate for that at the next available opportunity. It makes sense to do so. 
 The Civil Partnership Bill is still before the House and has not been enacted. All hon. Members will have recognised over the past few weeks that a change to 
 one part of the tax system can often have much wider ramifications, so it makes sense to deal with a package of reforms in one go and to implement the tax commitments that flow from the legislation once it has been passed. 
 In many cases, adults who share a household without living together as partners do not leave their property to the person with whom they share it. Where they do intend to leave it, they have the same opportunity as unmarried couples to minimise the impact of inheritance tax by dividing the ownership in their joint lifetime. In those circumstances, IHT is not an issue unless the shared property is worth more than £500,000. 
 The IHT rules have already recognised in principle that people inheriting big illiquid assets, such as a house, can have difficulties meeting tax bills up front. Where the property remains unsold, the provision exists for tax to be paid in instalments on generous terms with an attractive rate of interest over as long as 10 years. Many estates start paying their IHT in that way, but the great majority pay just one instalment before settling the outstanding amount in one lump sum. 
 Despite all the sympathy that we share with people who have lost a companion in such circumstances, that confirms to me that there is no real target for justifying a substantial cost to the Exchequer and the taxpayer of perhaps £100 million. I hope that at this point in proceedings the hon. Gentleman will not press his new clause to the vote.

Howard Flight: There are just two points that I would like to stress. First, there will be an interval between the passing of the Civil Partnership Bill and the promised IHT exemption.
 It being twenty-five minutes past Eleven o'clock, the Chairman, pursuant to Standing Order No. 88 (Meetings of Standing Committees), deferred adjourning the Committee.

Howard Flight: No doubt, some partners will die during that period, so there will be no benefit. I should have thought that it would be possible to build the promised provision into this Bill.
 Secondly, once the Civil Partnership Bill takes effect, there will be an ongoing issue with people asking, quite correctly, ''Why should someone get this tax benefit only if they happen to sign a civil partnership contract?'' There is no moral difference between two sisters living together and two other people of the same sex living together, but their IHT situations will be different. That is an ongoing issue. 
 I am pleased that the Government are committed to addressing the first part of the problem, albeit not in this Bill. I appreciate the fact that people will be able to own a property half each, which in many cases will mitigate the problem. However, as the Minister will be aware, the rise in property prices in the south-east has been such that quite a few people are still affected by this issue. 
 To a fair extent, the new clause is a probing clause, and although the Government have responded only in part, I would not want to the put it to a vote. I beg to ask leave to withdraw the motion. 
 Motion and clause, by leave, withdrawn. 
 Clause 308 ordered to stand part of the Bill.

Schedule 40 - Repeals

Amendments made: No. 553, in 
schedule 40, page 564, line 17, at end insert—
 '( ) Employment-related securities and options
 Short title and chapter Extent of repeal
 Income Tax (Earnings and Pensions) Act 2003 (c.1)
 Section 421G.
 Section 429(5).
 Section 443(5).
 Section 446R(5).
 Section 449(4).
 In section 519(1), the word ''and'' at the end of paragraph (a).
 In section 524(1), the word ''and'' at the end of paragraph (a).
 Section 701(2)(c)(ii).
 Finance Act 2003 (c.14) In Schedule 21, paragraph 18(4).
 1. The repeals in sections 429, 443, 446R and 449 of the Income Tax (Earnings and Pensions) Act 2003 have effect in accordance with section (Employee-controlled companies and unconnected companies)(8).
 2. The remaining repeals have effect in accordance with section (Approved plans and schemes)(11).'.
 No. 501, in 
schedule 40, page 570, line 12, at end insert— 
 'In section 58(2), the words ''part of or'' and the words ''fund or'' (in both places).'. 
No. 502, in 
schedule 40, page 572, line 13, at end insert— 
 'In section 566(4), the entry relating to section 623.'. 
 —[Dawn Primarolo.] 
 Question proposed, That this schedule, as amended, be the Fortieth schedule to the Bill.

Harry Cohen: On the top of page 565, there is what looks like a reduction in child support provision, albeit a limited one. Will the Paymaster General give me a note in due course to explain the position?
 New clause 14, which was in my name, was not chosen for debate, although if it had been, I would have given a passionate and persuasive speech. When the Paymaster General writes to me, could she also embrace the new clause and tell me the Government's position on it?

Dawn Primarolo: I am happy to write to my hon. Friend. He did not give me notice of his point, and I could not find the relevant part of the schedule fast
 enough, but I am more than happy to write to him and to ensure that all members of the Committee receive a copy of the letter.
 Question put and agreed to. 
 Schedule 40, as amended, agreed to. 
 Clauses 309 and 310 ordered to stand part of the Bill. 
 Question proposed, That the Chairman do now report the Bill, except clauses 5, 20, 28, 57 to 77, 86, 111 and 282 to 289, and schedules 1, 2, 11, 12, 21 and 37 to 39, as amended, to the House.

Dawn Primarolo: On a point of order, Sir John. As we conclude the Committee stage of the Finance Bill, I wish to put on record my thanks to you and to Mr. McWilliam for the excellent way in which you guided us through our considerations. I also wish to thank the hon. Members for Arundel and South Downs, for Chichester, for Hertford and Stortford (Mr. Prisk) and for Tatton (Mr. Osborne), whose contributions to the debates produced lively exchanges across the Room. I thank them for the good-humoured but businesslike way in which they approached the discussions. I thank the hon. Members for Yeovil and for Torridge and West Devon, who also played an active part in the Committee.
 To the Clerks, thank you—as ever—for ensuring that we knew which amendments we were debating at each point and that we dealt with them in a sensible order. I also thank the Hansard staff, the police officers, the messengers and the Officers of the House for their assistance. 
 To my hon. Friends the Financial Secretary and the Economic Secretary, I offer heartfelt thanks for their contributions and assistance both in this Committee and when we return to the House. I sincerely thank my hon. Friend the Member for Wolverhampton, South-West (Rob Marris), who is unable to be here this morning, for the help that he has given Ministers and for proof that members of the Committee do actually read Bills. I thank my hon. Friend the Member for Ealing, North, who had such an important role in reporting to the hon. Member for Grantham and Stamford (Mr. Davies) what the hon. Member for Tatton had to say about his non-attendance at this Committee. 
 I thank my hon. Friends the Members for Stalybridge and Hyde (James Purnell) and for West Bromwich, East (Mr. Watson) for their support of Ministers in this Committee. My hon. Friends the Members for Rhondda (Chris Bryant), for Elmet (Colin Burgon), for Leyton and Wanstead (Harry Cohen), for Dagenham (Jon Cruddas), for Liverpool, Riverside (Mrs. Ellman), for Barnsley, East and Mexborough (Jeff Ennis), for Rochdale (Mrs. Fitzsimons), for Ashton-under-Lyne (Mr. Heyes), for Scarborough and Whitby (Lawrie Quinn) and for South Derbyshire (Mr. Todd) can now have their diaries back, although they were desperate to be with us. 
 Finally, I particularly thank the Government Whip, my hon. Friend the Member for Poplar and Canning Town (Jim Fitzpatrick), and the Opposition Whip, the hon. Member for Hexham (Mr. Atkinson), for the businesslike, fair, steady, sober pace at which we considered the Bill, and for the skilful manner in which they enabled us to undertake manoeuvres and deliver success at the end. I sincerely hope that England's players follow the same practice this evening and skilfully go through to the next round of the European cup.

Howard Flight: Further to that point of order, Sir John. I second those comments and particularly thank you, and ask you to relay our thanks to Mr. McWilliam, for your very amiable, professional and efficient chairing of our deliberations. I also thank the Clerks. I notice that Frank Cranmer is here. As hon. Members know, the work on a Finance Bill is much harder on the Opposition side, and we are very grateful for his help with the drafting as well as the organisation of our amendments.
 I thank my colleagues, who have done a great deal of work, for their support and the professional way in which they handled those parts of the Bill for which they were responsible. 
 I particularly congratulate the Paymaster General. What stoicism—her 10th Finance Bill. I congratulate her and the two other Ministers on their professional presentation and handling of the Bill. The work has been long and hard for everyone. We all appreciate the 
 fact that the Bill was not timetabled this year and that, as a result, we covered the whole Bill within the allotted time. 
 I add my thanks to the police, the reporters, the ushers and the doorkeepers. I also thank and congratulate the hon. Members for Torridge and West Devon and for Yeovil, who have been solid supporters of most of the Opposition's arguments. I congratulate everyone on toiling away effectively through a very long and hard-worked Bill.

David Laws: I, too, thank you, Sir John, and your co-Chairman, Mr. McWilliam, for your skilful and tolerant chairmanship of our proceedings in the past few weeks. We have enjoyed debating the various issues and, on the whole, our Front-Bench exchanges have been very constructive. I also thank the Clerk and all the other officials who have contributed, and the outside advisers who have provided us with ammunition and guidance.
 During lunch, I shall check my attendance record against the Paymaster General's. If I have a better record, I shall write to her. If not, she may not hear from me.

John Butterfill: It has been a great pleasure to have had the opportunity to chair such a good-natured Committee. This is my 14th Finance Bill, so masochism knows no bounds.
 Question put and agreed to. 
 Bill, except clauses 4, 5, 20, 28, 57 to 77, 86, 111 and 282 to 289, and schedules 1, 3, 11, 12, 21 and 37 to 39, as amended, to be reported. 
Committee rose at twenty-three minutes to Twelve o'clock.